Unrealized decretal amount not taxable as income when only entered in books and not actually received.

An unrealized decretal amount entered in the assessee's books was held not to constitute taxable income under the Income-tax Act, 1922, because a mere book entry did not convert an unreceived decree into income in its ordinary sense. The court noted that the territorial language in section 4 did not enlarge the meaning of income, and that the definitions and computation provisions did not support taxing an amount that had not been realized. The account system was also found to be directed to ascertaining the family's financial position for the year, not to treating the decree as income received. The assessment failed to that extent.

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Issues: (i) Whether an unrealized decretal amount entered in the assessee's books constituted taxable income under the Income-tax Act, 1922; (ii) Whether the assessee's method of keeping accounts was only for ascertaining the family's financial position in the relevant year.

Issue (i): Whether an unrealized decretal amount entered in the assessee's books constituted taxable income under the Income-tax Act, 1922.

Analysis: The books were relied upon for assessment under Section 13, but the mere entry of a decretal amount did not make it income in the ordinary sense. Section 4 referred to income accruing, arising, or received in British India for territorial application, not for expanding the meaning of income itself. The Act did not define income so as to include a decree that had not been realized, and the definition of total income in Section 2(15) and the computation under Section 16 did not support treating an unrealized decree as taxable income.

Conclusion: The unrealized decretal amount was not taxable income.

Issue (ii): Whether the assessee's method of keeping accounts was only for ascertaining the family's financial position in the relevant year.

Analysis: The account system was examined in light of the books and ledger entries, but the entries did not show that the unrealized decree was intended to be treated as income received. The account method was consistent with determining the financial state of the family for the year.

Conclusion: The assessee's account system was for ascertaining the family's financial position and not for treating the unrealized decree as taxable receipt.

Final Conclusion: The reference was answered in favour of the assessee, and the assessment could not stand insofar as it treated the unrealized decree as taxable income.

Ratio Decidendi: An amount that has merely been decreed and entered in the books, but has not been actually received, is not income taxable under the Income-tax Act, 1922 unless the statute clearly enlarges the ordinary meaning of income.

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